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Twitch to shut down in Korea over 'prohibitively expensive' network fees

Twitch, the popular video streaming service, plans to shut down its business in South Korea on February 27 after finding that operating in one of the world's largest esports markets is "prohibitively expensive."

Twitch CEO Dan Clancy said the firm undertook a "significant effort" to reduce the network costs to operate in Korea, but ultimately the fees to operate in the East Asian nation was still 10 times more expensive than in most other countries. The ceasing of operations in Korea is a "unique situation," he wrote in a blog post.

South Korea's expensive internet fees have led to legal fights -- streaming giant Netflix unsuccessfully sued a local broadband supplier last year to avoid paying usage charges, but Seoul's court ruled that Netflix must contribute to the network costs enabling its half-billion-dollar Korean business.

Twitch attempted to lower its network costs by experimenting with a peer-to-peer model and then downgrading the streaming quality to 720p video resolution, Clancy said. While these efforts helped the firm lower its network costs, it wasn't enough. The Amazon-owned streaming service said it has been operating in Korea at a "significant loss," and there was "no pathway forward" to run the business sustainably in the country.

"I want to reiterate that this was a very difficult decision and one we are very disappointed we had to make. Korea has always and will continue to play a special role in the international esports community and we are incredibly grateful for the communities they built on Twitch," wrote Clancy.

Esports is huge in South Korea, with pro gaming a cultural phenomenon and top players enjoying celebrity status. Over half the country's 50 million population are esports fans. South Korea dominates competitive gaming worldwide, especially in titles like Starcraft and League of Legends, hosting multiple major tournaments annually. Twitch had amassed million of users in South Korea, which was also one of the popular markets for the streaming service.

Like South Korea, telecom operators in many other markets are beginning to push for content providers to pay for network costs. Telecom operators in India, the second largest wireless market, recommended earlier this year that internet companies compensate them for using the networks. Network operators in India cited the regulatory changes in Korea as one of their inspirations.